What are the Freddie Mac Texas Refinancing Programs?
There are few choices available to Texas homeowners interested in taking cash out by refinancing an existing home loan. Through the Federal Home Loan Mortgage Corporation, Freddie Mac or FHLMC, there is a home equity and cash out refinance program. This Texas 50(a)(6) loan allows borrowers to take equity out of a homestead property under certain conditions.
The Non-Home Equity program, Texas 50(a)(4), provides an option for a rate and term refinance of an existing Texas Home Equity loan.
FHLMC TX Mortgage Basics
- 15 year, 20 year, 25 year, or 30 year fully amortizing fixed
- No adjustable rate mortgages
- 620 minimum qualifying credit score
- 1 Unit primary residence located in the State of Texas
- Property types include stick built homes (attached or detached), approved condos, Planned Unit Developments, and approved manufactured housing (multi-width only, no single wides)
- Borrow up to 80% of the value of the home
What are the benefits?
Texas has several unique restrictions when it comes to cash out refinancing that must be complied with by homeowners within the state. The Texas Home Equity and Non-Home Equity loans provide a means for homeowners to take advantage of the equity in their homes for other purposes such as education, home improvements, medical costs, savings, or other investments, while remaining in accordance with Texas state law.
Who qualifies for a Freddie Mac Texas Refinance?
To be eligible for an equity or non-equity loan there must be sufficient equity in the property, and the new mortgage can only represent a maximum of 80% of the home’s value. The borrower must retain at least 20% equity in a primary residence. If another equity loan has been taken out on the home in the past, the new loan cannot be closed within one year of the closing date of the previous financing. This one year prohibition remains in effect even if the prior loan has been repaid in full. Borrowers must meet the employment, credit, income, asset, and property requirements associated with the home equity or non-home equity loan they are applying for. Some of these eligibility requirements include:
- Minimum qualifying credit score of 620. Higher qualifying scores are required in some scenarios.
- Eligible property types: Stick built homes (attached or detached), approved condos, PUDs, and approved multi-width manufactured homes. Primary residence only.
In which scenarios is the Freddie Mac TX Equity or Non-Equity worth considering?
Homeowners who want to make use of some of the equity in their Texas primary residence for other purposes, or who want to refinance an existing equity loan, will likely find this program a good option. The benefits available through refinancing vary according to several factors such as current interest rates, property value, existing loan amount, terms of the existing mortgage, and the credit worthiness of the borrower. Depending on the scenario, potential advantages of refinancing with a Freddie Max TX equity or non-home equity loan could include:
- A lower mortgage rate
- A lower monthly payment
- Reduced interest payment over the life of the loan
- Shorter loan term
- Take cash out for other uses
The History of Texas Cash Out Refinancing
The Texas State Constitution imposes some restrictions on how homeowners can take cash out through refinancing the mortgage on a property used as their primary residence. It’s important to note that these additional requirements apply to owner occupied homes only, and second homes and investment properties may qualify for the traditional cash out refinancing products traditionally used in other states.
These restrictions, listed in Article XVI, Section 50(a)(6) include:
- A minimum of 20% equity must be retained
- A Texas Cash Out home equity loan may only be obtained once every twelve months
- If refinancing a Texas Cash Out mortgage it must be refinanced into another Cash Out Loan, even if no additional cash out is being taken with the new transaction
- An attorney must review the loan before closing
Buying a Home with a TX Cash Out Mortgage
Because this is a refinance product it cannot be used to finance the purchase of a new home. It is not uncommon however for the cash taken out of a primary residence to be used towards the down payment on another property, either a second home or investment.
TX Cash Out Refinancing
The Freddie Mac Texas Home Equity and Non-Home Equity programs are ideal for refinancing a home to either take cash out or refinance a home loan where cash was taken out previously. They help homeowners make use of their primary residence to achieve their financial goals while complying with Texas State Law.
Other Programs to Consider
If a FHLMC TX Home Equity and Non-Home Equity is not required one of these programs may be worth exploring:
- Low rate conforming mortgage: FHLMC Fully Amortizing Fixed Rate & Super Conforming
- Low down payment, 30 year fully amortizing fixed option: FHA 203(b)
- Up to 100% financing for low to moderate income homeowners in rural areas: USDA Rural Housing Loans